(CNN Spanish) – Powerball jackpot is increasing. But don’t get your hopes up too quickly: if you manage to match all the numbers, the prize you will receive will be much less.
Calculating the tax is not easy and ultimately depends on your own circumstances. The Internal Revenue Service (IRS) considers lottery winnings to be income and the balance left to contribute to federal coffers is based on your total annual income.
However, there are some numbers that help get an idea. If you win the biggest jackpot (the odds of doing so are 1 in 292.2 million), the prize will be subject to a higher federal tax rate of 37%.
Also, depending on where you live, you need to factor in potential state taxes. New York is the state with the highest rate for prizes over $5,000: it is 8.82%. Of the states that will charge you, the lowest is North Dakota, which remains at 2.9%.
But there are states that do not impose additional taxes, among them California and Florida. In this case your only contribution to government funds will be from the IRS.
So out of the total upgrade, you’ll be left with a lot less than that, but more than enough for almost any wish you have to make it come true.
If you win a smaller Powerball prize, do you have to pay taxes?
It depends on the total. The IRS does not take deductions for awards of up to $600. Since then, there are two different situations: If your prize goes from that number to $5,000, you must add the winning to your tax return, and that number depends on the final calculation. If the prize is greater than $5,000 USD, discounts ranging from 24% to 37% will be applied.
At the state level, there are also differences by amount which you can check here.
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